|
-
-
-
-
-
-
-
-
-
-
1. Introduction
The corporate income tax (CIT) is, besides VAT, the most important tax levied on activities of legal persons in Poland. This is a flat-rate tax, generally imposed on income.
Back...
2. Tax rates
The basic corporate income tax rate is 19% of the tax base. In special cases the CIT Act provides for other rates [1].
In case tax authorities make an adjustment of a taxpayer’s income (loss) resulting from a transaction with a related entity and the taxpayer does not submit the required transfer pricing documentation with reference to the transaction, the difference between the income declared by the taxpayer and calculated by tax authorities shall be subject to taxation with a tax rate of 50%.
19% tax rate is also applicable to dividends and other incomes (revenues) from participation in profits of legal persons with their seat in Poland .
For taxpayers with unlimited tax liability in a EU Member State, an exemption from the withholding tax on dividends paid out by Polish companies is provided (participation exemption). The application of the above-mentioned exemption is possible if such a shareholder holds or will hold minimum 10% of shares in the Polish company during the period of at least 2 years and if the shareholder is not exempted from taxation with reference to its whole income.
In case of dividends gained from abroad, the Polish tax provisions provide for two exemption methods: participation exemption (relating to income generated in EU Member State, another EEA Member State, and Switzerland) and underlying tax credit (regarding states other than EU, EEA Members and Switzerland with which Poland has a valid double tax treaty).
Participation exemption is applied if the Polish company has held at least 10% capital participation in the foreign subsidiary for an uninterrupted period of at least 2 years and if it is not exempted from taxation with reference to its whole income . However, the required minimum participation of a Polish parent company in a Swiss company is 25%.
The tax actually paid by a foreign company with its seat in the non-EU or non-EEC country other than Switzerland with which Poland concluded a double tax treaty on the part of its profits from which a dividend was paid may be credited– up to some limit - against income tax payable by the Polish parent company in Poland (underlying tax credit). To apply the underlying tax credit, the Polish recipient shall hold at least 75% of the capital in the company paying out the dividend. Notwithstanding the above the Polish recipient of dividends from abroad may also – up to the limit – credit the withholding tax paid abroad against tax payable in Poland.
As of July 1st, 2013, on certain conditions, a total exemption from withholding tax will also refer to interest and royalties transferred from Poland to related companies from the EU. At present, the withholding tax rate in the circumstances in which finally the exemption shall be applicable accounts for 5%.
Back...
3. Subject of taxation
The entities subject to the corporate income tax are as follows:
-
legal persons (in particular: limited liability companies, joint-stock companies, capital companies in organisation);
-
partners being legal persons;
-
foreign partnerships, if in the state where their seat is located they are treated as legal persons and are subject to unlimited tax liability there;
-
tax capital groups [2].
Back...
4. Object of taxation
Generally, the corporate income tax is imposed on income, irrespective of the source of revenue from which the income has been earned.
Entities having their seat or management in Poland are subject to taxation with respect to their global income irrespective of where it was generated (unlimited tax liability). Other entities are subject to taxation in Poland only with regard to income generated in Poland (limited tax liability).
The income is considered to be the surplus of total revenues over tax deductible costs incurred in a tax year. If tax deductible costs exceed the amount of revenues, the difference constitutes a loss.
Tax losses incurred in previous tax years may reduce a taxable income of a taxpayer. A loss may be carried forward for 5 years following the year in which it was incurred, however the amount deducted in a given year shall not exceed 50% of the loss value (i.e. the shortest period of a one year loss settlement is 2 years) [3].
A tax year is defined as a calendar year. However, after meeting certain criteria specified in the CIT Act, a taxpayer may decide that the tax year is a period of other 12 consecutive calendar months.
Back...
5. Revenues
The following items (among others) are considered to be the revenue:
-
money and monetary values received, including foreign exchange differences,
-
value of non-monetary benefits and revenues in-kind received,
-
value of debts which were redeemed or prescribed,
-
value of the paid off debts, which were previously written off as irretrievable or redeemed and recognised as tax deductible costs,
-
in case of VAT reduction or refund – input VAT in its part corresponding to the amount previously recognised as a tax deductible cost.
In case of business activity a revenue due even if not yet actually received generally constitutes taxable revenue after exclusion of the value of goods returned as well as rebates and discounts granted.
The date of receiving revenue from business activity shall be deemed the day of:
The list below presents examples of items which are not considered revenues for tax purposes:
-
advance payments received or amounts accounted for the future provision of goods and services which are to be performed in the next reporting periods,
-
revenue received for establishment or increase of share capital,
-
additional payments contributed to a limited liability company,
-
loans (credits) received or returned,
-
interests relating to receivables accrued but not received including interests on loans granted
-
output VAT,
-
returned, redeemed or desisted taxes and charges, which constitute revenues of the State Treasury or budgets of territorial self-governments units, if they had not been treated as tax deductible costs before,
-
VAT refund,
-
other returned expenses not being recognised as tax deductible costs.
Revenues in foreign currencies shall be expressed in PLN on the basis of the Polish National Bank’s average rate of exchange from the last working day preceding the day of receiving the revenue.
Back...
6. Tax exemptions regarding object of taxation
A catalogue of tax exemptions regarding object of taxation includes inter alia the following items:
-
income received by taxpayers from governments of foreign states, international organisations or international financial institutions, deriving from non-returnable aid, including funds from framework projects regarding research, development and introduction of the European Union and from NATO projects,
-
income earned from economic activity carried on within a Special Economic Zone on the basis of an appropriate permit.
-
grants, subsidies and other gratuitous benefits received in order to cover costs or as costs’ refunds if the costs refer to fixed assets,
-
revenues gained abroad, if an adequate double tax treaty so provides.
Back...
7. Tax deductible costs
In order to be recognised as tax deductible cost, an expenditure incurred by a taxpayer should jointly meet the following criteria:
-
the expenditure was incurred with purpose of generating income, retaining or protecting sources of income,
-
it is not listed in the catalogue of expenditures not being tax-deductible costs.
The revenue earning costs can be classified as direct costs or other costs.
As a rule, direct costs are deductible in the tax year in which the related revenue was earned. Other costs are deductible on the date they were incurred.
Tax deductible costs incurred in foreign currencies, should be converted into PLN on the basis of the average exchange rates of the National Bank of Poland from the last working day preceding the day the costs were incurred.
Back...
8. Foreign exchange differences
Foreign exchange differences may be calculated for income tax purposes according the provisions on accountancy (on condition that the taxpayer’s financial statement is revised by an auditor) or according to the CIT Act provisions. The taxable foreign exchange differences according to the CIT Act arise in the following cases:
-
gaining revenue in a foreign currency;
-
incurring expense in a foreign currency;
-
transfer of a foreign currency;
-
granting a credit (loan) in a foreign currency;
-
receiving a credit (loan) in a foreign currency.
As a rule foreign exchange differences resulting from an expense excluded from taxable costs cannot be taken into account for tax purposes.
Positive balance of foreign exchange differences increases taxable revenues, the negative balance - increases taxable costs.
Back...
9. Tax base
Generally, the tax base is considered to be income (defined as the excess of revenues over tax deductible costs with exclusion of incomes exempt from taxation), reduced by certain deductions made by the taxpayer during the tax year.
The tax base may be reduced by donations for public utility purposes and for religious purposes. The deduction in total may not exceed 10% of income.
Furthermore it is possible to deduct from the tax base 50% of expenditures for acquisition of new technologies from scientific entities. A new technology is defined as technology knowledge which has been in use for less than 5 years. The deduction does not impact the right to depreciate the acquired technologies.
In order to recognise given income as a tax base, a taxpayer is obliged to keep proper accounting records. If it is not possible to determine income (or loss) on the basis of records kept by a taxpayer, the income (or loss) shall be assessed by tax authorities.
The risk of income assessment refers also to taxpayers concluding transaction with related entities as defined in the CIT Act, if the transaction prices deviate from market prices (transfer pricing).
Back...
10. Collection of tax
In the course of the year taxpayers are obliged to transfer to the bank account of a tax office monthly tax advance payments in the amount of the difference between the tax due on the income earned from the beginning of the tax year and total advance payments due in preceding months. Monthly tax advance payments shall be remitted by taxpayers by the 20th day of each month for the preceding month.
A final settlement of tax is deemed to be completed on the day a yearly tax return is submitted by a taxpayer to the tax office and the tax due is paid. This should be done at the end of the third month of the year following the tax year at the latest [4].
The CIT Act provides for a simplified form of calculation and payment of the tax advance payments. Taxpayers are entitled to make monthly advance payments in the amount of 1/12 of the tax due, as calculated in the yearly tax statement for the year preceding given tax year. If there was no tax due in the said statement, taxpayers are entitled to make monthly advance payments in the amount of 1/12 of the tax due, as shown in the yearly tax statement for the year preceding by two years a given tax year.
The so-called “small entrepreneurs” who launch their business activities may benefit from the so-called tax credit. This is a relief consisting in exemption from an obligation to pay tax advance payments and deferral of tax on income generated in the first tax year, which should be paid in five equal yearly installments starting from the year directly following the year for which the tax is settled.
In case of taxpayers with a limited tax liability in Poland, tax due in Poland on their incomes from Polish sources is in most cases withheld and transferred to the tax office by tax-remitters i.e. entities executing payments to such taxpayers (e.g. on account of licence fees, dividends, interests) Tax settlement according to the above described general rules applies in particular to these foreign companies which have a permanent establishment in Poland (in the meaning of double tax treaties) with reference to income that can be attributed to its activities, including foreign companies being partners in partnerships established in Poland.
Back...
[1] Other rates may apply to incomes of taxpayers with limited tax liability in Poland, with reference to inter alia the following revenues gained within the territory of Poland: from interests, copyrights or similar rights, rights to invention designs, trade-marks and design patterns, know-how, or from other immaterial services (e.g. advisory services, market research services, management and control services, guarantee and assurance services). As a rule, these revenues are subject to 20% tax rate, unless an appropriate double taxation treaty provides otherwise. Taxpayers with limited tax liability in Poland who receive remuneration as foreign sea trading companies, as well as foreign air transportation companies, are subject to 10% tax on the revenues, unless an appropriate double taxation treaty provides otherwise. It should be noted that application of the tax rate resulting from the double taxation treaty or non-collection of the tax according to the provisions of such treaty is permitted, provided that the tax residence of taxpayer is confirmed in the so-called certificate of tax residence, issued by tax authorities in the state of taxpayer’s residence.
[2] The tax capital group may be formed by a group of related capital companies having their seats in Poland. An average share capital of the companies may not be lower than PLN 1.000.000. The direct share of a “dominant company” in the capital of „dependent companies” shall amount to 95%. The so-called profit index (i.e., the ratio of income to total revenue of the group) should account for at least 3%.
[3] In the case of transformations (including mergers and divisions), except for transformation of a capital company into another capital company, the losses of taxpayers subject to such transformation, merger, take-over or division are not taken into account fro calculating the taxable income of the transformed entity; the same applies in the case of privatisation of State enterprises.
[4] Additionally, within 10 days from the approval of the annual financial statement, the taxpayer should submit the financial statement together with the auditor’s opinion and report (if the audit was obligatory). The companies should also attach a copy of the resolution on the approval of the financial statement.
Back...
Last update: January 2012
Prepared for the Polish Information and Foreign Investment Agency by:
|
